Situation:Taxpayer was a resident of Pennsylvania, but earned income while working at a job in another state.Which state(s) does he need to pay taxes to?Does he get taxed twice on the same income?

Most states impose a personal income tax on non-residents for all income earned within the state, and Pennsylvania imposes a personal income tax on residents for all income earned, regardless of where it was earned.

For a resident of Pennsylvania working in Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia, the taxpayer would only owe Pennsylvania taxes, as each of those states has a reciprocal agreement with Pennsylvania.A reciprocal agreement between two states means that neither state will impose an income tax on wage income of the other state’s residents.

If the second state is any other state with an income tax, such as New York, the taxpayer would be required to file tax returns in both states.On their Pennsylvania tax return, the taxpayer would receive a credit up to the amount they would have owed on that income in Pennsylvania.In a state with an income tax higher than Pennsylvania’s income tax, like New York, the taxpayer would typically not end up owing additional taxes to Pennsylvania for the income earned in New York.While the taxpayer reports the income to two states, the resident credit prevents double taxation.

Mark Breon, EA

Mark is an IRS Enrolled Agent with a focus on the tax issues facing small businesses and individuals.

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